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Shutterfly Tests Resistance Following Earnings, Guidance

SFLY topped fourth-quarter expectations, but its full-year outlook was dismal

by 2/2/2012 11:30:55 AM
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After the close last night, Shutterfly, Inc. (SFLY - 25.80) joined in on the busy corporate earnings season, and posted its fourth-quarter results. SFLY said its profit rose 8.9% to $35.4 million, up from a year-ago profit of $32.5 million. On a per-share basis, however, earnings fell to 97 cents from $1.09 per share, as the most recent period had 22% more shares outstanding. Net revenue, meanwhile, increased 59% to $263.8 million. The Redwood City, Calif.-based company's results were better than expected, as analysts were calling for a profit of 82 cents per share on $260.8 million in revenue.

For the current quarter, the Internet firm is expecting a net loss of 31 cents to 43 cents per share on revenue of $83 million to $85 million. Wall Street is looking for a per-share loss of 32 cents on $90.4 million in revenue. SFLY believes its full-year earnings will range between 25 cents and 28 cents per share on revenue of $550 million to $560 million, while analysts are anticipating per-share earnings of 52 cents on $584.7 million in sales.

Against this backdrop, SFLY was hit with at least three different price-target cuts this morning: Barclays slashed its target by $24 to $40; Baird dropped its price target to $32 from $44; and Jefferies decreased its target by $10 to $30.

There could be additional downward revisions in store for SFLY. Thomson Reuters places the average 12-month price target at $37.90, which represents a hefty 61.5% premium to today's intraday low of $23.47. After the disappointing forecast, there could also be a bout of fresh downgrades just around the corner. Zacks is reporting that 10 out of 12 brokerages consider SFLY worthy of a "buy" or better rating, nine of which are "strong buys."

Elsewhere, the options arena is teeming with optimism. During the past two weeks, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 5.96 calls for every put. This ratio is in the 95th percentile of its annual range, signaling that traders on these exchanges have seldom made bullish bets over bearish at a faster pace during the past year.

Technically speaking, SFLY has spent time on both sides of breakeven today. At last look, the equity is in positive territory, but is staring up at the $26 mark -- which has restricted all of its weekly closes since early Dec. 2011.


With staunch technical resistance looming overhead, an unwinding of bullish sentiment among analysts or options traders could keep SFLY under pressure in the near term.


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